Wednesday, May 24, 2017

Hardwoods Distribution Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Materials Stock. Stock price is probably reasonable to expensive. It is certainly not cheap. It has done well for shareholders over the past 5 years. See my spreadsheet on Hardwoods Distribution Inc.

I do not own this stock of Hardwoods Distribution Inc. (TSX-HWD, OTC-HDIUF). In April 2017, I asked for suggestions on what stocks I should now follow because of a number that I had followed and had are being bought out. This was one of the suggestions. This stock was certainly a lot easier to do a spreadsheet and analysis than Pizza Pizza was.

As far as dividends go, this company has increased them, decreased them and suspended them and they have only been around since 2004. They also started out as an income trust company and changed to a corporation in 2011. A lot of the old income trust companies have had a hard time switching to corporations as far as dividends are concerned. When they are corporations the dividends are limited by the earnings, but this was not true for income trust companies.

Since dividends were restarted in 2012, the Dividend Payout Ratios for EPS has been very good. The DPR for EPS for 2016 is 12.2% with 5 year running payout at 18.7%. The DPR for CFPS for 2016 is at 10.9% with the 5 year running payout at $10.5%. There is a tension between giving shareholders a return in dividends and keeping money for reinvestment in the business. At the current low DPR, investment in the business should be very possible.

The debt ratios for 2016 are good. The Liquidity Ratio for 2016 is 1.83 with a 5 year median of 2.77. The Debt Ratio is 2.56 for 2016 with a 5 year median of 3.28. The Leverage and Debt/Equity Ratios are also good with the ones for 2016 at 1.64 and 0.64 respectively.

For Return on Equity, it has only been below 10% once in the past 5 years and that is 5 years ago. The ROE for 2016 was 10.6% with the 5 yea median at 12.9%. The ROE on Comprehensive Income for 2016 was 10.4% with a 5 year median of 18.1%.

This company has done well over the past 5 years with Revenues up 30% per year, Revenue per Share up 20.9% per year, EPS up 26.23% per year and CFPS up 40.3% per year. Also the total return has been very good with total return to date at 32.6% per year with dividends of 2.2% per year and capital gain at 30.4% per year.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.73, 12.55 and 14.74. The 10 year corresponding values are 7.95, 10.55 and 13.10. The historical values are 9.18, 10.78 and 13.98. The current P/E Ratio is 11.84 based on a stock price $19.42 and 2017 EPS estimate of $1.64. This stock price testing suggest that the stock price is relatively reasonable and around the median.

I get a Graham Price of $19.97. The 10 year low, median and high median Price/Graham Price Ratios are 0.55, 0.73 and 0.91. The current P/GP Ratio is 0.97 based on a stock price of $19.42. This stock price testing suggests that the stock price is relatively expensive. However, it should be noted that any P/GP Ratio of 1.00 or lower is considered a very good price when buying stock.

I get a 10 year Price/Book Value per Share Ratio of 1.00. The current P/B Ratio is 1.80 a value some 79% higher. The current P/B Ratio is based on BVPS of $10.80 and a stock price of $19.42. This stock price testing suggests that the stock price is relatively expensive. However, it should be noted that a P/B Ratio of 1.50 (and below) is considered a good P/B Ratio when buying stock.

Since this was an old income trust stock, the dividend yield test may not be a good one. The 5 year median dividend yield is 1.56%. The current dividend yield is 1.29% a value some 17% lower. The current dividend yield is based on dividends of $0.25 and a stock price of $19.42. This testing suggests that the stock price is reasonable, but above the median.

The 10 year median P/S Ratio is 0.28. The current P/S Ratio is 0.39 a value some 40% higher. The P/S Ratio is based on a stock price of $19.42 and 2017 Revenue estimate of $1051M and Revenue per Share of $49.20. This stock price testing suggests that the stock price is relatively expensive.

One of the problems with this stock is that few analysts follow it (there are 4) and they give little in the way of estimates. The 4 analysts that follow this stock give it a rating of Buy, so the consensus recommendation is a Buy. The 12 month stock price consensus is $25.17. This implies a total return of 30.90% with 29.61% from capital gains and $1.29% from dividends.

The staff at Dasher Business Review give some technical analysis of this stock. They the company's VC score is 41 where 0 is an undervalued company and 100 is an overvalued company. David Glaser on Sports Perspectives says that the National Bank has increased the second quarterly earnings for this company from $0.42 to $0.44. On the Buckeye Business Review site this company is given top score for stability and growth. See what analysts are saying about this company on Stock Chase. They think it is a good company.

Hardwoods Distribution Inc. is a Canada-based company engaged in the wholesale distribution of hardwood lumber and related sheet good and specialty products. The Company operates through its Canada and United States segments. Its web site is here Hardwoods Distribution Inc.

The last stock I wrote about was about was Mullen Group (TSX-MTL, OTC-MLLGF)... learn more. The next stock I will write about will be Ensign Energy Services (TSX-ESI, OTC-ESVIF)... learn more on Friday, May 26, 2017 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks... learn more on Thursday, May 25, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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